New Report Ignores Health Plans’ Efforts to Improve Patient Care

A new report released today by the Commonwealth Fund examining what health plans spent on quality improvement activities in 2011 is based on medical loss ratio (MLR) data that ignores a variety of programs and services health plans have implemented to improve care for patients.

Despite what some have said, the MLR is not simply a cap on health plans’ profits, salaries, and marketing costs.  The MLR caps any expense that does not go directly to pay for medical care or is not included on a pre-approved list of “activities that improve health care quality.”  As a result, this regulation places an arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system, and help control soaring medical costs.  These include:

  • Initiatives to prevent and deter fraud and abuse in the health care system;
  • Developing partnerships with providers, such as Accountable Care Organizations, to reward quality, value, and better health outcomes;
  • Credentialing health care providers to ensure that in-network doctors and hospitals provide safe, high-quality care;
  • Providing patients with online and mobile access to their claims history and Personal Health Records;
  • Sending notices to physicians and pharmacists about potential harmful drug interactions;
  • Providing information to providers in real-time about what treatments work best; and
  • Providing individuals and small businesses with access to agents and brokers to help find the coverage that is right for them.

There is broad recognition that health care costs continue to rise at an unsustainable rate.  But the data are very clear that soaring medical costs – not health plans’ administrative costs – are driving health care cost growth.  According to historical government data going back to the 1960s, the portion of premiums allocated to health plans’ administrative costs has been consistent for decades and in 2011 was among the lowest in recent years, despite the fact that health plans have been incurring new compliance and regulatory costs related to the health care reform law.

Despite the challenges created by the MLR, health plans are continuing to lead the way on delivery system reform and quality improvement.  Health plans are partnering with hospitals and doctors all across the country to change payment models to reward quality and better health outcomes, and they have pioneered innovative programs and services to coordinate care for patients with multiple chronic conditions, help patients manage chronic disease, and promote prevention and wellness. These initiatives have demonstrated results in better health outcomes, improved patient safety, fewer preventable hospital readmissions and lower healthcare costs.  In fact, policymakers are now trying to get Medicare and Medicaid to adopt many of the programs that have proven to work in the private sector.

For more information on health plans’ efforts to improve care, check out AHIP’s Innovations in Recognizing and Rewarding Quality and Innovations in Reducing Preventable Hospital Admissions, Readmissions and Emergency Room Use.

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